BlackRock ETFs outperform Vanguard as South Korea’s emerging market status holds firm

BlackRock’s iShares Core MSCI Emerging Markets ETF, ticker IEMG, has outpaced Vanguard’s FTSE Emerging Markets ETF, ticker VWO, by roughly 16 percentage points year-to-date through mid-May 2026. The reason is almost entirely one country: South Korea.

One country, two very different portfolios

MSCI classifies South Korea as an emerging market. FTSE reclassified it as a developed market back in 2009. That single decision explains why the two largest emerging market ETFs in the world are having very different years.

VWO tracks the FTSE index and carries zero exposure to South Korean equities. IEMG tracks MSCI and holds a weighting of more than 12% in Korean names, with Samsung Electronics and SK Hynix sitting near the top of the portfolio.

VWO returned 12% year-to-date and 26% over one year. Samsung and SK Hynix are two of the dominant players in global memory chip production, and demand for that memory, largely driven by AI infrastructure buildouts, has been a defining investment theme of 2025 and 2026. The KOSPI index has ranked among the world’s top-performing major markets in 2026 as a direct result.

MSCI reviewed South Korea in June 2026 and kept it exactly where it was

On June 23, 2026, MSCI completed its annual market classification review and confirmed that South Korea would remain in the emerging markets category. No watchlist placement, no formal reclassification process, no upgrade to developed status.

MSCI CEO Henry Fernandez pointed to foreign-exchange accessibility as the central barrier. Specifically, the absence of a fully deliverable offshore won market means institutional investors cannot efficiently manage currency exposure in the way that developed market designation would require.

For IEMG holders, that decision was good news in the short term. Keeping South Korea inside the emerging markets index means the ETF retains its exposure to Samsung and SK Hynix. A reclassification to developed would trigger South Korea’s removal from MSCI Emerging Markets, forcing index-tracking funds to sell those positions.

What this means for investors choosing between IEMG and VWO

Both IEMG and VWO are marketed as broad emerging market equity funds. Both carry low expense ratios. But their country exposures differ substantially, and that difference has compounded into a 16-percentage-point gap in a single year.

Vanguard surpassed BlackRock as the largest US ETF issuer in June 2026, with assets of $4.39 trillion against BlackRock’s $4.36 trillion. That overall size comparison sits in contrast to the product-level performance story, where BlackRock’s IEMG has held the advantage this year.